Question of the day
2026-08-17
LBO
What three levers create equity value in an LBO, and how do you reference them in a paper LBO?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
- EBITDA growth — from revenue growth and/or margin expansion, raising exit EV at a constant multiple.
- Debt paydown / deleveraging — FCF reduces net debt, so a larger slice of exit EV accrues to equity.
- Multiple expansion — exiting at a higher multiple than entry (buy low, sell high). In a paper LBO you can attribute the equity gain to these three buckets; interviewers love when you say 'most of the return here comes from deleveraging, not multiple expansion.'
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